As Rod Sims takes on the tech giants, the world will be watching

By John McDuling

But even our supermarkets, banks and airlines would blush at the level of concentration in the digital advertising market.

Two internet behemoths - Google and Facebook - are expected to capture 84 per cent of global digital advertising spending this year, according to media buying agency GroupM.

Facebook is in the sights of the Australian competition watchdog.

Photo: AP

The same two companies are set to gobble up almost all of the growth in the entire advertising industry next year.

Reliable figures on the so-called digital duopoly's position in Australia are harder to come by. But we should have a clearer indication of that 12 to 18 months from now.

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That's when the Australian Competition and Consumer Commission will complete an inquiry into Google and Facebook; an inquiry it formally opened this week.

Sanctioned back in September by the Turnbull government to secure support in Parliament for its domestic media reforms, the review will be watched closely in Canberra, and by local media executives.

But its significance will be felt well beyond these shores.

Rod Sims rejects the idea that the global spotlight will place more pressure on the ACCC to come up with strong recommendations.

Photo: Alex Ellinghausen

The man ultimately in charge of the review, ACCC chairman Rod Sims, is well aware of that.

"This is a world first," he tells Fairfax Media. "We do attract international attention occassionally, but this one will be the first review of its kind.

"They [digital platforms] have been looked at for other reasons. But in a sense, this [inquiry] goes to the heart of their business models, so I'd be surprised if it didn't get attention."

The inquiry will investigate the impact digital platforms are having on competition in media and advertising services markets.

For the tech industry's growing band of critics, it is exquisitely timed.

Internet giants are facing unprecedented scrutiny from lawmakers and regulators around the world at the moment.

This follows a string of missteps and scandals that have totally altered perceptions of their industry in the media (if not yet among users or investors).

For years, coverage of tech has been dominated by awe over groundbreaking products and soaring share prices.

Now, it is just as likely to involve infiltration by Russian trolls and other groups to spread misinformation, fears about the industry's role in job displacement and inequality and, in a local context, controversies around taxes.

For years, Silicon Valley's unique blend of employing mostly socially liberal people while still being a collection of ruthless and tremendously profitable businesses insulated it against political criticism.

Now, with populism back en vogue in the US, elements of both the left (think Bernie Sanders and Elizabeth Warren) and the right (think Steve Bannon) are openly hostile.

Yet despite all of this, it remains doubtful whether America's increasingly paralysed and ineffective institutions will actually be able to do anything to curtail the industry's power.

That's why many people think the biggest risk to Facebook and Google actually lies outside the US, rather than within it.

For example, New York University professor Scott Galloway recently declared he would not be surprised if an EU nation "outright bans one of these companies from doing business in their country".

Which brings us back to the ACCC inquiry, which could conceivably set international precedents.

Sources at Google and Facebook are relatively relaxed about the process, which, they note, has no direct power to change anything.

When it concludes the inquiry, the ACCC will make recommendations to the government, which would first need to be adopted by a party room, before legislation even comes into play.

Still, the process carries significant risks.

The ACCC has information gathering powers - resisting them is a criminal offence. Together with public hearings, who knows might be unearthed.

Sims is widely respected, and regarded as a straight shooter.

He is entering the inquiry with an open mind, and rejects the idea that the global spotlight will place more pressure on the ACCC to come up with strong recommendations.

What those recommendations, if any, might look like is an open question.

There isn't much to compare against. For example, an attempt by Spain to get Google to pay publishers for links to their stories backfired spectacularly - the search giant simply shut down its news page in the country.

What we do know is Sims, is not afraid of courting controversy - his intervention into the national energy debate is the most recent example of that.

It's just that this time, as he scrutinises Facebook and Google, the spotlight will be much bigger than usual.

John McDuling writes about business, technology and the economy. Previously he was a reporter for Quartz in New York, covered telecommunications and markets for the Financial Review, and worked in the finance industry.